CROSS PLUS INC.

A decline in consumer sentiment due to domestic and overseas economic slowdown or price increases in daily necessities may lead to weak apparel sales or lower selling prices. In addition, apparel products are highly seasonal, and sales are prone to fluctuation due to unseasonable weather such as prolonged heat or mild winters. As a countermeasure, the Group is strengthening its earnings base by improving the profitability of Apparel Wholesale and expanding Retail and Lifestyle Wholesale.

If the Group fails to respond to rapid changes in fashion trends and shifts in consumer preferences and cannot provide appropriate products, weak sales may adversely affect business performance. As a countermeasure, the Group is improving the precision of product planning through continuous collection and analysis of fashion information, and is addressing diverse consumer preferences by developing multiple brands and multiple sales channels.

If a natural disaster such as an earthquake, fire, or storm/flood damage occurs, difficulties in business operations may arise, potentially affecting business performance. As a countermeasure, the Group has formulated a BCP (Business Continuity Plan) and continuously conducts emergency response drills assuming a large-scale earthquake, aiming to improve the level of emergency response across the entire Group.

The majority of products are produced and imported from Asian countries, primarily China, and if natural disasters, pandemics, terrorism, war, political upheaval, or deteriorating economic conditions occur locally, appropriate product procurement may become difficult, and soaring raw material prices may adversely affect business performance. As a countermeasure, the Group has secured multiple raw material procurement sources to eliminate dependence on any specific supplier, while establishing a procurement system that ensures appropriate pricing.

Since most products are produced and imported overseas, with the majority of settlements denominated in US dollars, sharp or extreme fluctuations in foreign exchange rates may lead to rising product costs, potentially affecting business performance. As a countermeasure, the Group utilizes forward exchange contracts in product procurement to level out import exchange rates, striving to stabilize procurement costs and reduce foreign exchange fluctuation risk.

The Group holds a large volume of personal information and confidential information related to development and sales operations. If such information is leaked due to power outages, communication failures, human error, or unauthorized external access through cyber attacks, this could result in restoration costs, loss of important data, business interruption, damage to social credibility, and liability for damages. As a countermeasure, the Group has established a multi-layered security system combining a zero-trust model with multi-factor authentication, and has introduced SIEM and EDR/SOC (24/7/365 monitoring).

As part of its growth strategy, the Group is promoting business expansion through M&A and business alliances; however, if market economic conditions deteriorate or expected earnings and synergy effects are not achieved, this may adversely affect business performance. As a countermeasure, the Group clarifies the purpose and significance of acquisitions, identifies risks, and conducts quantitative evaluations of return on invested capital, with a governance structure in which significant matters above a certain monetary threshold are deliberated by the Board of Directors.

The Group is expanding products and sales channels in response to changes in customers and markets, and developing new business formats including lifestyle products; however, if progress does not proceed as planned or results fail to materialize due to changes in the market environment, this may affect business performance. As a countermeasure, the Group implements business restructuring and structural reforms at appropriate times while closely monitoring market trends, and reflects expected losses in its financial results when losses are anticipated over the medium to long term.

If a new infectious disease outbreak occurs, stagnation of production bases and logistics systems, as well as a decline in economic activity and personal consumption, may adversely affect business performance. As a countermeasure, the Group takes preventive and containment measures with the safety of customers and employees as the top priority, while expanding sales through the development of apparel and lifestyle products suited to conditions under infectious disease impact and by actively promoting EC sales.